Problem 7-20 Activity-Based Costing and Bidding on Jobs [L02, L03] Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company's estimator has been involved in a long-simmering dispute with the on-site work supervisors. The on-site supervisors claim that the estimator does not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestoscontaminated ceiling plaster in industrial buildings. The onsite supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: \"Myjob is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square metres by $4,400 per thousand square metres to determine the bid price. Since our average cost is only $3,400 per thousand square metres, that leaves enough cushion to take care ofthe additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.\" To shed light on this controversy, the company initiated an ABC study of all of its costs. Data from the ABC system follow: Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square metres 500,000 m2 Estimating and job setup Number of jobs 240 jobs* Working on nonroutine jobs Number of nonroutine jobs 25 nonroutine jobs other (costs of idle capacity and Not applicable; these costs are not organizationsustaining costs) allocated to jobs. * The total number ofjobs includes non-routinejobs as well as routinejobs. Non-routinejobs as well as routinejobs require estimating and setup work. Wages and salaries $ 240,000 Disposal fees 660,000 Equipment depreciation 92,000 Onsite supplies 68,000 Office expenses 222,000 Licensing and insurance 418,000 Total cost $1,700,000 Distribution of Resource Consumption across Activity Cost Pools Removing Estimating and Working on Non- Asbestos Job Setup routine Jobs Other Total Wages and salaries 40% 10% 35% 15% 100% Disposal fees 75% 0% 25% 0% 100% Equipment depreciation 45% 0% 40% 15% 100% Onsite supplies 50% 15% 25% 10% 100% Office expenses 10% 40% 30% 20% 100% Licensing and insurance 50% 0% 45% 5% 100% Required: 1. Perform the rststage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a O wherever it is required.) Wages and salaries Disposal fees Equipment depreciation On-site supplies Ofce expenses Licensing and insurance Total cost 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Removing asbestos per thousand square metres per non-routinejob Estimating and job setup Working on non-routine jobs 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square metres of each of the following jobs according to the ABC system: a. A routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Average cost per thousand square metres b. A routine 2.000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres c. A non-routine 1,000-squaremetre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job _ Cost per thousand square metres _